Corporate Taxation
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Course Introduction
Corporate Taxation examines the rules and principles governing the taxation of corporations and their shareholders under federal law. The course covers topics such as the formation and structure of corporations, distributions to shareholders, mergers and acquisitions, reorganizations, liquidations, and the taxation of corporate income. Students will gain an understanding of policy rationales, tax planning strategies, and compliance requirements, using real-world examples to analyze the impact of tax laws on business decisions and corporate structures. This course is essential for those interested in corporate law, accounting, or pursuing careers in tax advisory or business consulting.
Recommended Textbook
Fundamentals of Taxation 2017 Edition 10th Edition by Ana Cruz
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Chapter 1: Introduction to Taxation, the Income Tax
Formula, and Form 1040ez
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Q1) Under a flat tax,the marginal tax rate and the average tax rate are different.
A)True
B)False Answer: False
Q2) A Private Letter Ruling is considered to be tax authority only to the taxpayer to whom it is issued.
A)True
B)False Answer: True
Q3) Employers report wage income to employees on a Form W-3.
A)True
B)False
Answer: False
Q4) What is a Private Letter Ruling PLR)? What tax authority is provided by a PLR?
Answer: The IRS issues a PLR when a taxpayer requests a ruling on a certain tax situation.The PLR is tax authority only to the taxpayer to whom it is issued.
Q5) Alex is single and had W-2 income of $59,989 and interest income of $354.What is his taxable income?
Answer: Alex's taxable income is $59,989 + $354 - $10,350 = $49,993.
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Chapter
2:
Expanded Tax Formula, forms 1040a and 1040, and Basic Concepts
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Q1) Using the appropriate tax tables or tax rate schedules,determine the amount of tax liability in each of the following instances.All answers should be rounded to the nearest dollar.
1.A single person with taxable income of $103,500.
2.A married couple filing jointly with taxable income of $37,700.
3.A head of household with taxable income of $87,925.
4.A person filing married filing separately with taxable income of $64,000.
5.A married couple filing jointly with taxable income of $144,600.
Answer: 1.$22,017.$103,500 - 91,150)× 28% plus $18,558.75. 2.$4,731.Look up $37,700 under the tax tables for married filing jointly. 3.$16,279.Look up $87,925 under the tax tables for head of household. 4.$11,778.Look up $64,000 under the tax tables for married filing separately.5.$27,693.$144,600 - $75,300)× 25% plus $10,367.50.
Q2) The taxpayer's brother must live with the taxpayer for the entire year to meet the relationship or member of household test under qualifying relatives.
A)True
B)False
Answer: False
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Chapter 3: Gross Income: Inclusions and Exclusions
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Q1) If Lucas,an accountant,agrees to provide tax services to a neighbor in exchange for the neighbor agreeing to fix his pool,Lucas but not his neighbor will have to report income on this transaction at fair market value.
A)True
B)False Answer: False
Q2) There are some instances where a cash-basis taxpayer can report income as though he or she is an accrual basis taxpayer.
A)True
B)False Answer: True
Q3) An individual must complete Schedule B Forms 1040A or 1040)if the following situation occurs:
A)Received interest income of $1,300.
B)Received interest income of $600.
C)Received interest income of $1,500.
D)Received interest income of $1,750.
Answer: D
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Chapter 4: Adjustments for Adjusted Gross Income
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Q1) For self-employed taxpayers,3/4 of the amount of self-employment taxes are deductible as an above-the-line deduction.
A)True B)False
Q2) In lieu of making cash payments of alimony directly to a former spouse,payments to a third party on behalf of the former spouse can qualify as alimony.
A)True B)False
Q3) For 2016,the amount of the student loan interest deduction is limited to $3,500.
A)True B)False
Q4) The percentage of self-employed health insurance premiums that could be deductible as a for AGI deduction is:
A)100%.
B)80%.
C)50%.
D)70%.
Q5) Define each of the following: alimony,child support,and a property settlement.
Q6) What is a Health Savings Account HSA)?
Page 6
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Chapter 5: Itemized Deductions
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Q1) In 2016,the U.S.President declared a federal disaster due to the flooding in North Carolina.Dan lives in that area and lost his home in the flood.What choice does he have regarding when he can claim the loss on his tax return?
A)It must be claimed in 2015 if the return has not been filed by the date of the loss.
B)It may be claimed in 2017 if an election is filed with the 2016 return.
C)It must be claimed in 2016 if the loss is greater than the modified adjusted gross income.
D)It may be claimed in 2015 or 2016.
Q2) During 2016,Manuel and Gloria,who are married,incurred acquisition debt on their new residence of $1,150,000.On their joint tax return,what is the amount of their qualified acquisition debt on which they can deduct interest?
A)$1,050,000.
B)$1,000,000.
C)$1,150,000.
D)$900,000.
Q3) Personal casualty losses resulting from termite damage are deductible.
A)True
B)False
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Chapter 6: Self-Employed Business Income Line 12 of Form
1040 and Schedule C
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Q1) Which of the following is incorrect regarding luxury automobile limitations?
A)The luxury limitations do not apply to the Section 179 expense deduction.
B)The limits are reduced further if the business use is less than 100%.
C)Light trucks or vans that are less than 6,000 pounds are subject to the limits.
D)Passenger autos with a gross weight of less than 6,000 pounds are subject to the limits.
Q2) Katherine earned $100,000 from her job at a local business in 2016.She also had $42,000 in self-employed consulting income.What is the amount of her self-employment tax rounded to the nearest dollar?
A)$6,426.
B)$0.
C)$3,419.
D)$6,333.
Q3) Fines paid that are ordinary and necessary in a trade or business generally are deductible.
A)True
B)False
Q4) Describe each of the depreciation conventions and when each is applicable.
Q5) List and define the criteria for an expenditure to be deductible on Schedule C.
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Chapter 7: Capital Gains and Other Sales of Property
Schedule D and Form 4797
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Q1) Josephine gave her son,Shane 700 shares of Creative Marketing Inc.,common stock on May 26,2015.Josephine originally paid $9,000 for the stock on April 15,2015.At the date of the gift,the fair market value of the stock was $8,500.If no gift tax is paid and Shane sells the stock for $5,500 on May 26,2016,he will recognize:
A)a short-term capital loss.
B)an ordinary loss.
C)no loss because Josephine already recognized the loss when she gave the stock to Shane.
D)a long-term capital loss.
Q2) Mikeala has taxable income of $73,240,without consideration of capital gain or loss transactions.Mikeala has a short-term capital gain of $11,000,a short-term capital gain of 3,000,and a long-term capital loss of $4,000.
a.What is the net capital gainloss)included in taxable income?
b.Is it short-term or long-term in nature?
c.What is the amount and nature of any carryover?
d.Assuming none of the gains or losses is from collectibles or unrecaptured Section 1250 property,at what tax rate will the gains or losses be taxed to Mikeala? Mikeala is in the 33% tax bracket for ordinary income.)
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Chapter 8: Rental Property, royalties, and Income From
Flow-Through Entities Line 17, form 1040, and Schedule E
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Q1) Explain the difference between the two methods available; the Tax Court's method and the IRS method,to allocate expenses between personal and rental use of property.
Q2) Richard owns a cabin in Utah that he rented for $4,000 for 21 days.He lived there for a total of 120 days.The expenses for the home included $8,000 in mortgage interest,$1,200 in property taxes, $1,300 in maintenance and utilities,and $3,500 in depreciation.How much net income or loss from the Utah home would Richard report for the current year use the IRS method)? Round your answer to the nearest whole number)
A)$10,000 net loss.
B)$4,000 net income.
C)$1,915 net income.
D)$0.
Q3) Capital improvements on rental properties may be deducted in the current year.
A)True
B)False
Q4) What criteria determine a personal and rental use property as personal/rental? How is net income or loss treated for tax purposes for a personal/rental property?
Q5) Explain what is considered personal use of a rental property.
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Chapter
9: Tax Credits Form 1040, lines 46 Through 54 and Lines 66a Through 73
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Q1) A taxpayer may become ineligible for earned income credit if he/she has excessive disqualified income such as dividends or interest.
A)True
B)False
Q2) Molly is single with AGI of $22,500.During the year,she contributed $900 to an IRA.What amount of retirement savings contributions credit can Molly claim?
A)$90.
B)$0.
C)$180.
D)$900.
Q3) The maximum allowable American opportunity tax credit for the current tax year is $2,500 per eligible student.
A)True
B)False
Q4) The main goal of Congress in offering tax credits is to collect additional revenues.
A)True
B)False
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Chapter 10: Payroll Taxes
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Q1) For wages paid in 2016,an employer must send Copy A of each Form W-2 along with the W-3 transmittal form to the SSA no later than:
A)March 1,2017.
B)January 31,2017.
C)February 28,2017.
D)February 1,2017.
Q2) The maximum penalty imposed on employers for incorrect or late filing of W-2s subject to maximum penalties)is:
A)$100 per form.
B)$260 per form.
C)$530 per form.
D)$50 per form.
Q3) Irene earned wages of $119,200 during 2016.How much will Irene's employer withhold in social security taxes for the year?
A)$7,316.00.
B)$7,347.00.
C)$7,390.40.
D)$7,254.00.
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Chapter 11: Retirement and Other Tax-Deferred Plans and Annuities
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Q1) Tax-deferred plans are only available for purposes of saving for retirement.
A)True
B)False
Q2) Jill is single,age 27,and reported AGI of $62,000 in tax year 2016.She is an active participant in her employer's pension plan.What is the maximum deductible Roth IRA contribution she can make in 2016?
A)$4,400.
B)$0.
C)$5,500.
D)$1,100.
Q3) Under what circumstances might an individual want to establish an annuity contract in retirement?
Q4) All of the following are employer-sponsored plans except: A)403b.
B)Qualified profit-sharing plan.
C)Coverdell Education Savings Account.
D)Keogh plan.
Q5) An annuity is a series of payments made pursuant to a contract.
A)True
B)False
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Chapter 12: Special Property Transactions
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Q1) An apartment building with an adjusted basis of $500,000 was destroyed by a tornado on April 30,2016.On May 10,2016,the insurance company paid the owner $695,000.The owner reinvested $570,000 in a new apartment complex.What is the basis of the new complex if non-recognition of gain from an involuntary conversion is elected?
A)$570,000.
B)$625,000.
C)$500,000.
D)$695,000.
Q2) On an involuntary conversion,gain is recognized to the extent of the lower of gain realized or the proceeds not used for replacement.
A)True
B)False
Q3) No deduction is allowed with respect to any loss from the sale or exchange of property,directly or indirectly,between related parties.
A)True
B)False
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14
Chapter 13: At-Riskpassive Activity Loss Rules and the
Individual Alternative Minimum Tax
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Q1) How much,in rental losses,can an individual earning a salary of $125,000 per year offset against salary if he or she owns at least 10% of a rental activity and actively participates in the rental activity?
A)$12,500.
B)$25,000.
C)$0.
D)$2,500.
Q2) Identify factors that increase or decrease the at-risk amount.
Q3) Bailey owns a 20% interest in a partnership not involved in real estate)in which his at-risk amount was $25,000 at the beginning of the year.During the year,Bailey receives a distribution of $20,000 from the partnership.The partnership produces an $80,000 loss during the year.If you ignore the passive loss rules,Bailey's deductible loss for the year is:
A)$25,000.
B)$80,000.
C)$5,000.
D)$20,000.
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Chapter 14: Partnership Taxation
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Q1) Section 179 expense is reported:
A)As a separately stated item.
B)Both as an ordinary deduction and as a separately stated item.
C)As an ordinary deduction to a partnership.
D)As a capital loss to the partnership.
Q2) Paris,a 60% partner in Omega Partnership,has a basis of $25,000 in her partnership interest.Paris receives a cash distribution of $24,000 at year-end.What is Paris's basis in her partnership interest at the end of the year?
A)$25,000.
B)$24,000.
C)$1,000.
D)$0.
Q3) Rental income and expenses are treated as:
A)Separately stated because individual partners may treat rental income or losses differently.
B)Capital gains or losses because the rental property is an investment.
C)Ordinary income for all partners.
D)None of these.
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16
Chapter 15: Corporate Taxation
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Q1) A Subchapter S corporation must be a domestic corporation.
A)True
B)False
Q2) If a corporation has a net capital loss,the loss is carried forward indefinitely.
A)True
B)False
Q3) C corporations with average annual gross receipts over $5 million must use the accrual basis of accounting.
A)True
B)False
Q4) A C corporation has a fiscal year-end of August 30.It requests an automatic extension of time to file its income tax return.It must file its return no later than the 15<sup>th</sup><sup> </sup>day of:
A)March.
B)April.
C)May.
D)June.
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